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The challenges facing the new government in Pakistan can be summed up as FATA and atta.

FATA is the acronym for the federally administered tribal areas - the badlands on the Afghan border that are reputedly infested with Taliban and al-Qaeda and are the focus of U.S. attention in the "war on terror."

Atta is the Urdu word for flour, the food staple that has been in perilously short supply in the weeks leading up to the election. Rising food prices, plus gas and electricity shortages, may have been the issues that cost the previous regime the most votes.

But for the new administration to tackle these practical problems, it will have to fight some political battles in Islamabad. No party won an outright majority in last week's parliamentary election, so a coalition government, led by the Pakistan People's Party, will have to be formed and kept together.

Sitting above the politicians is President Pervez Musharraf, who has been used to exercising complete power. His aides acknowledge that the President will find it difficult not to meddle, but note that he does retain the ultimate weapon: the power to sack the government, under the highly controversial 17th constitutional amendment introduced by his government in 2003. And, all the while, the people of Pakistan will be looking obsessively at how far policy is being dictated by Washington.

"We are not a stooge party," said Senator Enver Baig, a senior member of the PPP. "Now parliament will be supreme and govern according to the wishes of the people. Mr. Musharraf had a dummy prime minister and a dummy political party. The rules of the game have changed."

One further political hazard is the incendiary issue of reinstating the judiciary sacked by Mr. Musharraf in November. The country's lawyers have formed a powerful pressure group, which has threatened to march on the capital unless the judges are restored by March 9. The PPP and its likely coalition partner, the party led by Nawaz Sharif, have promised to bring the justices back but they have given no timetable and some have questioned their commitment. While Mr. Musharraf was able to order the police to baton-charge the lawyers, an elected government will have a much harder task dealing with a black-suited army of protesting lawyers.

While it is Pakistan's struggle with terrorism that makes headline news, the most pressing problem may be the country's fast-deteriorating economy, which is under pressure from rising inflation, runaway government borrowing, a widening fiscal deficit and a trade imbalance that shot up 47 per cent in the first seven months of this financial year.

Consumers have complained loudly about inflation but prices have actually been kept down by massive subsidies that are considered unsustainable - $2-billion a year for fuel, for instance. Those subsidies will have to be lifted, economists said, which could make for some very unpopular decisions by the new government.

"It will be extremely difficult for them [the incoming government] to load more misery on people, but they'll have to do it," said Sakib Sherani, chief economist at ABN Amro bank in Islamabad. "If they do not take hard decisions up front, then it could slide into a dire situation."

In the months leading up to the Feb. 18 election, a terror campaign by Islamic extremists based in FATA threatened to overwhelm the country. Yesterday, Pakistan's main Taliban group, led by warlord Baitullah Mehsud, offered talks with the new administration.

"We hope after the government comes into power, they will not make the mistake of continuing the existing policies and will bring peace to the people of tribal areas," Tehrik-e-Taliban spokesman Maulvi Umar said. "We want peace and are looking for dialogue with those who got elected."

The new government will be under tremendous domestic pressure to seek a political settlement in the tribal areas, using its legitimacy as a representative government - not least from the Awami National Party, the pro-peace nationalists who emerged as the biggest party in the North-West Frontier Province that runs alongside FATA.

A deal with the militants that amounts to a hands-off policy for FATA is not what the U.S. and Afghan governments want.

They say the Taliban uses the area as a base for operations against troops in Afghanistan. Mr. Musharraf's regime oscillated between bombing the militants and negotiating with them. The new government will need to come up with a more coherent policy against terror, and fast.

Special to The Globe and Mail